The Premier League currently offers the greatest financial incomes for any football team across all competition in the world, find out how does it cost for a teams when they undergo relegation to The Championship
Every year, The Championship playoff final, which decides the teams that get promoted to the Premier League is often described as a £100 million game.
How much does relegation from the Premier League cost a team relegated to the championship
Coventry City, by being relegated to League 2, became the first team in the inaugural season of the Premier League to drop to that level, winning the Checkatrade Trophy could not paper over the cracks of relegation.
Coventry 2016/17 finances explained:https://t.co/t5XwkskZce pic.twitter.com/R3pGrgHGYT
— Tifo Football (@TifoFootball_) August 2, 2018
I love that teams like Luton, Bournemouth & Brentford are able to progress all the way up to the Premier League. Best thing about our football pyramid is promotion and relegation, must be protected at all costs.
— Sam (@SibsMUFC) May 27, 2023
What an outstanding coach
Rising a bournemouth from the four tiers of english football to premier league despite the point deduction and transfer embargo problems
Transforming Newcastle from just a team that struggle in the relegation battle into an high ranking team https://t.co/VLuf45QqXL
— Miracle Bagaskara (@MiracleBagas) October 23, 2022
Swansea City are still feeling the financial impact of their Premier League relegation.
The club’s chief operating officer has given an update on their finances.
Read👉https://t.co/JjdRhK6ZYD pic.twitter.com/oVFUHtbRcl
— BBC Sport (@BBCSport) January 18, 2019
Aside from the financial benefits of joining the Premier League, the price of dropping out is arguably even higher.
Financial value for a team in the Premier League
Back in the 2021-22 season, clubs in the Premier League split prize money wins from a total of £2.6 billion. Compare this to about 30 years ago in the 1992-93 when clubs shared slightly more than £35m, and the figure shows a huge increase. According to experts, League winners Manchester City, earned around £164m while even the bottom-placed side Norwich City earned almost £100m.
Moreover, there are also several other variables that make a competing in the Premier League hugely more valuable to clubs. Teams get to enjoy increased commercial activity, marketing power and global interest.
Football finance oracle Kieran Maguire once shared:
If you talk to commercial directors, they say they can charge 10 times as much for a 30-second advert on the pitch side perimeters in the Premier League than in the Championship because it’s going out to a global audience. For example, Leeds got an extra £6m in commercial income once they were in the Premier League.”
Premier League TV broadcast rights deals money value
Premier League teams earn huge revenues from TV rights deals. Aside from a £79m share of TV money, clubs can earned around £940,000 per televised game during the 2021-22 season.
This meant that the more a club was selected for live broadcasts the more the teams earned. Top teams like Liverpool and Arsenal each played in 29 televised games during the previous campaign, earning around £27.3m. Meanwhile, teams like Watford, Norwich, Burnley and Southampton only took part in 12 live broadcast games. As such, they managed to earn around £11.3m in ‘facility fees’.
Maguire again shared that:
Teams in the Championship would normally get around £7.5-8m from TV”.
Cost of Premier League relegation
When clubs undergo a relegation from the Premier League to The Championship, the revenue and commercial value undergoes a steep decline. Clubs however, often keep paying Premier League wages to some players. Despite this, clubs cut down on staff members, who often earn far less than players. This forms a major part of the cost of a relegation.
Back in the 2018-19 season, EFL chairman Rick Parry compared the gap in earnings between Championship winners Norwich and Premier League relegated side Huddersfield Town, who finished at the bottom as an “unbridgeable” £88m.
Premier League parachute payments
Over the years, some Premier League clubs have suffered a financial crisis after being relegated or spiraled down the lower leagues. As such, to help relegated teams, the English league system introduced the parachute payments in 2011-12.
By the 2015-16 season, following the new system, clubs have received 55% of the broadcast revenues in their first year after relegation (around £40m), 45% (£35m) the year after that and 20% (£15m) in the subsequent year. Interestingly, club that remain in the Premier League for just one season, receive only the first two parachute payments.
Later in November 2022, all the Premier League clubs came together to sign an agreement, ensuring increased payments given out to EFL clubs. It also agreed for further discussions over parachute payments. Based on this agreement, EFL clubs would earn merit money, and come under the same financial rules and spending limits as Premier League clubs.
Just recently, in February 2023, experts proposed a new parachute payments system for pooling Premier League and EFL TV revenues. According to this system, 75% of the revenue would go towards top-flight clubs while the remainder would got to the rest of the league. Moreover, the TV money would be distributed according to position in the Premier League, like the EFL’s distribution format.
Financial measure for Premier League clubs to cope with relegation to The Championship
There are certain financial measures that clubs in the Premier League can follow to make relegation to The Championship easier. This includes measures like adding pay cuts into player contracts and selling stars.
A fin example of this was how manager Rafael Benitez who despite failing to save Newcastle United from relegation during the 2015-16 campaign, led the team to promotion the following season. In the process, he even helped the club make a profit during the summer by selling players including Moussa Sissoko for almost £30m.
The financial hit of getting relegated is still very hard with clubs who earn the maximum amount from parachute payments still end up getting only a minimum of around £10m less than compared to the value they would earn from Premier League TV payments alone. Moreover, the broadcasting income from the Championship is very negligible in comparison to the Premier League.
However, clubs have managed to work it out in recent season. Fulham got promoted back to the Premier League at the first attempt back in 2021-22. Bournemouth also managed to return to the Premier League in two seasons following their relegation in 2019-20.